Question 1 [33]

1.1. The management of Gtobe Travel (Pty) Ltd extracted the following information from the accounting records for the financial year ending 30 June 2020:

Depreciation

R25 000

Administration expenses

R220 000

Sales

R3 450 000

Sales expenses

R180 000

Cost of goods sold

R2 550 000

Lease expense

R40 000

Interest expense

R30 000

Dividends on preference shares

R35 000

Dividend per ordinary share

RO.50

Number of ordinary shares in issue

900 000

Tax rate

28%

Required:

Use the information provided to calculate the earnings per share (EPS) and the net profit margin.

Show all calculations.(12)

1.2. You are a business journalist reporting on the financial performance of companies. In a recent interview with the CEO of an engineering company, the CEO stated that the company is performing very well at present and because it is using the most modern engineering technology while at the same time keeping its inventory levels low. The CEO stated that the use of state-of-the-art technology coupled with low inventory levels will soon result in the company achieving high profit levels.

The CEO presented the following ratio analysis to support his statements:

2017

2018

2019

2020

Current ratio

1.30

1.70

1.90

2.10

Quick ratio

1.20

0.80

0.50

0.40

Required:

Do you agree with the CEO's statement about profits? Use the information provided in the table to explain your answer.(14)

1.3. The information below was taken from a financial ratio analysis prepared by Canned Foods Ltd to assess its financial performance for 2019.

Sales revenue

R50 000 000

Gross rofit mar in

65%

O eratin

rofit mart in

Net rofit mar in

6%

Return on total assets

16%

Return on ordina shareholders' e

ui

18%

Total asset turnover

4%

Avera e collection eriod

58 da s

Number of da s in a ear

365

Assignment

Scuttletn Business School

Required:

Use the ratios and other information provided to calculate the rand value for the following accounts:

1.3.1. Gross profit

1.3.2. Cost of goods sold

1.3.3. Operating profit

1 .3.4. Operating expenses

1.3.5. Profit available to ordinary shareholders

1.3.6. Total assets

1.3.7. Total shareholders' equity

Show all calculations.(7)